Private Activity Bond (PAB)
The term used in the Code to describe any bond issued as part of a bond issue that meets both of the private business tests or meets the private loan financing test.
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Volume Cap
A requirement contained in Section 146 of the Code that Private Activity Bonds (PAB) (with certain exceptions) issued as Tax-Exempt Bonds obtain an allocation of Volume Cap from the state in which the project is located prior to the issuance of the Bonds. Notable exceptions to the Volume Cap requirement include Qualified 501(c)(3) Bonds, certain types of governmentally owned Exempt Facility Bonds and certain Refunding Bonds.
Each state has its own procedure for the allocation and certification as to Volume Cap. Bonds that are subject to a Volume Cap limit are generally subject to an overall issuance limit each calendar year within each state. Each year, the IRS publishes a revenue procedure that provides the Volume Cap applicable to each state. States then establishes their own procedures for further apportioning their allocable Volume Cap among the various Issuers and types of Private Activity Bonds with the state.
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Upgrade (Ratings)
The increasing of a rating by a rating agency. Higher ratings indicate higher credit quality.